Yahoo Missing the Boat

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For the past few months I’ve been getting a phone call from YPN about once a month because they’re looking for feedback. They want to know what’s going on with YPN from the publishers point of view (which is a whole heck of a lot more than I can say for adsense).

Every time they call, I tell them straight up that YPN stinks. And I don’t just tell them it stinks, I tell them how to fix it:

  • Figure out how to get correctly targeted ads. They’re always serving mortgage ads it seems, no matter what the topic of the site. It’s like they took a short cut and had some people in india go through and put a ton of words into categories. Then, they serve the category ads if the topic of the page fits under that ‘category’. So, even if the page is about structured settlements or insurance, I’m getting MORTGAGE ads!
  • Fix the ad layouts. They haven’t yet figured out how to get the ads into the boxes correctly so they don’t look very good.
  • Fix the Yahoo Search Marketing site. It’s sooooo difficult to run a ppc campaign right now, that advertisers don’t do it. Because of this, their ad inventory is super low, so they don’t have enough ads to put onto targeted web pages.

And they tell me:

“We’ve improved our targeting”
“We can’t do anything about Yahoo Search Marketing, that’s another department. But I’ll pass your comments on to them” (right…)
“Our ads look better than ever”

And they convince me to test their ads again.

I do.

They still stink!

So here’s an email I got this morning from Perry Marshall’s mailing list. Perry wrote the Definitive Guide to Adwords and is pretty much an expert on adwords.

(I love how he explains yahoo’s problems…it’s worth reading)

A few weeks ago, a Very Large Wall Street Investment
Firm with many hundreds of millions of dollars invested
in Yahoo and Google called me to schedule a consultation.

They wanted me to help them understand ‘How the sausage
is made’ and share my views on Google and Yahoo’s
long-term prospects for growth.

Back in the day, GoTo (oops, I guess they’re called
Overture now) (Oops, I guess they’re called Yahoo Search
Marketing now) had the tiger by the tail.

They built the world’s first Pay Per Click money machine
and they had it made in the shade. They organized all the
chaos of the Internet and started selling clicks. Now search
engines could finally start making some money.

And baby, did they ever make money. They thought
they were making a lot.

But then Google came along. Google showed ‘em how it
should REALLY be done. I’m not sure any company in the
history of the world has ever made so much with such apparent
ease.

You can ask any guy on the street why Google has done
so much better, and they’ll tell you it’s ‘cuz Google is just a
better search engine. And that’s true, but that’s only half the story.

The other half of the story is that they designed
AdWords to maximize the amount of money they make
on every search. Advertisers have great incentive to
lure people from the left side of the page to the right side
and click on those paid ads.

And yes, this has a LOT to do with you, as I shall
explain shortly. If you’re going to succeed in this game,
you’re going to succeed for the exact same reasons Google
succeeded. So pay close attention as I tell you what
I told the guys at the big investment firm.

You may know that Yahoo just changed the size
of their ads from 190 lines of description to 70, just
like Google.

Know why they did that?

Because Google figured out before Yahoo did that
they’ll make more money showing 10 little ads than
3 or 4 big ones. Yahoo finally figured it out too.

How did Google know that?

By testing.

Yahoo didn’t test.

Shame on Yahoo. (Shame on everyone who doesn’t
test, for they shall share the same fate.)

Well then there’s the Click Thru Rate formula. You
should know by now that Google multiplies your bid
price times your click thru rate to figure out where you
belong on the page. Yahoo doesn’t do that. Which
means Yahoo ads that get clicks don’t rise to the top,
and Yahoo makes less $ from every single search than
Google.

Now let’s say they make 10% less. Does that mean
they get 10% less business? NO, it’s worse than that.
Because they have syndication partners (MSN, Altavista
etc.) and thousands of individual sites who share the profit.

If their partners get a piece of the action, they make 10%
less too. Which means they’d rather run Google ads than
Yahoo ads. Which means Google gets more clicks
and Yahoo gets less. The 10% disadvantage becomes 25%.

But it gets still worse. Because if you’ve got 25% less
traffic, advertisers are 25% less interested which means
there’s fewer of them. So the bids are lower and now
you’re 40% behind not 10%.

In the real world of business, 10% is really 40%.

(You should write that on a piece of paper in big fat
magic marker and tape it to your wall.)

I’m not done yet. Yahoo’s software is 5 years old, it’s
clunky and horribly bureaucratic. Every time you want to
change something it takes 3 days and it’s a nightmare.

I told my friends who manage those hundreds of millions of
dollars that heads should have been rolling at Yahoo a LONG
time ago. Because… this should not be news to anybody!
Heck, I knew this 3 years ago, back when Overture was still
ahead of Google.

Sad. Very sad.

To our friends at Yahoo Search Marketing – who will no doubt
see this email – I say: You better accelerate your plans to fix
your stupid broken system, because you’re losing ground
every single day.

I say this as someone who has not the slightest interest
in the Wall Street side of this equation. I own no Google
stock (that would create a conflict of interest, given the
work I do). I own no Yahoo stock. What I’m interested in
me and my customers getting the most bang for our advertising
buck. And I know that pressure from Wall Street just makes
it tougher on advertisers.

Plus I’d like there to be at least one company besides
Google who doesn’t have their head stuffed in a cloud. I want
just ONE good PPC alternative to Google. How about you?

(Need I mention that MSN has a program in Beta right
now? Yahoo, you’d better watch out, Bill Gates is coming to
plunder your house.)

So why hasn’t yahoo figured it out yet?

Are they ever going to? Everyone’s rooting for them (except Google and MSN).

I’ll forward the email on to the girl at yahoo who has been calling me. I don’t think it will make a difference, but at least I’ll try.

Filed under Marketing, Search Engines by  #

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